Practices and Performance of Small Retail Stores in Developing Economies
Published 3/1/2009
Author: Tomasz Lenartowicz and Sridhar Balasubramanian
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Executive Summary
At the turn of the millennium, the locus of global economic growth has increasingly shifted toward developing economies in Asia, Africa, and South America. However, even as companies venture into these areas, their managers have encountered an unfamiliar retail format: tens of thousands of scattered, unsophisticated, small retail outlets. Retailing concepts developed in the context of developed economies are often not applicable in the small retailer context.
Lenartowicz and Balasubramanian study the practices and performance of these small retailers. First, they synthesize key findings about small retailers from the existing literature. This synthesis informs managers about the macro issues they must consider when managing the small retail sector. Second, they provide a complementary micro perspective into the decision-making processes and performance of small retailers in a specific market: the São Paulo urban area in Brazil.
Lenartowicz and Balasubramanian qualitatively analyze small retailer decision making through observational studies and interviews and establish how the retailers employ heuristics in their inventory decisions in a technology-impoverished environment. Next, they analyze a unique data set that includes information about the opening product inventory, reorders, and closing inventory across four weeks for 2547 retail outlets in the market. The data also include information on business type (covering six types of retail outlets), location, offered credit terms, the number of carried brands, and the identity of the salesperson for each store. The authors examine how distributor-related and supply-side variables, in conjunction with the quality of decision making, drive inventory turnover, a key measure of performance in the small retailer context.
The findings yield several managerial insights. First, with the revealed knowledge about how small retailers make ordering decisions, managers can influence these decisions more effectively to enhance the overall efficiency of the supply chain. Second, managers can optimally design supply-side policies to have the desired impact on retail and channel performance. For example, the findings suggest that superior credit terms offered to retailers, at least in the studied context, do not enhance retail performance. Accordingly, managers can redesign credit policies to reinvigorate their role as a driver of retail performance. Likewise, in line with the study’s findings, managers can fine-tune training and policies related to the sales force to enhance its effect on retail performance. Overall, the findings yield insights into how small retailers in developing economies function and how they can be better managed.
Biography
Tomasz Lenartowicz is Associate Professor of International Business at Barry Kaye College of Business at Florida Atlantic University. He earned a PhD at the University of South Carolina, a MSc from the Universidade de São Paulo, and a BSc in Industrial Engineering from the Instituto Tecnológico de Aeronáutica, São José do Campos, Brazil. His research interests include cross-cultural studies in international management, retail store productivity, and business in emerging markets. Lenartowicz has published in Journal of International Business Studies, Journal of Retailing, Management International Review, Journal of World Business, and International Journal of Emerging Markets. His research efforts have been recognized by the academic community, and he has won the first prize William R. Davidson Award for the best article published in the Journal of Retailing and the Florida Atlantic University—College of Business Researcher-of-the-Year Award, among others.
Sridhar Balasubramanian is Roy & Alice H. Richards Bicentennial Scholar, Associate Professor, and Marketing PhD Coordinator at the University of North Carolina’s Kenan-Flagler Business School. He pursues an active research agenda in the areas of marketing strategy, customer-focused innovation strategy, services design and marketing, technology and e-commerce, and game theory. His research has won prestigious awards from INFORMS and the National Science Foundation, including the 1998 John D.C. Little Award from INFORMS for the best marketing paper in Marketing Science and Management Science. Balasubramanian has also been frequently recognized for outstanding teaching. He was designated a MBA Master Teacher at UNC and has also taught in executive development programs in South America, Europe, and Asia. He an received MA and PhD from Yale University, an MBA from the Indian Institute of Management, and a B.Tech degree from the Indian Institute of Technology.
J International Marketing, Volume 17, Number 1, March 2009
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